International Flavors & Fragrances Inc. Lehman Brothers Back-to-School Conference September 5, 2007 Douglas Wetmore, SVP and CFO
Notices Forward Looking Statement: These slides contain forward looking information, which may be identified by terms such as expect, may, anticipated, guidance, outlook and similar terms and involve significant risks and uncertainties. Actual results may differ materially. Risks and uncertainties include general economic and business conditions; interest rates; the price, quality and availability of raw materials; our ability to achieve our business strategy and anticipated cost savings, profitability and growth targets; the impact of currency fluctuation or devaluation; uncertainties related to litigation; the impact of possible pension funding obligations and increased pension expense; and the effect of legal and regulatory proceedings and restrictions. We do not undertake to update or revise such forward-looking statements. These and other factors that could cause actual results to differ materially from such forward-looking statements are discussed in greater detail in our accompanying quarterly earnings release and in our SEC filings. Any public statements or disclosures by IFF following this release that modify or impact any of the outlook or other forwardlooking statements contained in or accompanying this release or as part of the webcast will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this release or the webcast. Non-GAAP Financial Measures: The Company uses certain non-gaap financial measures to supplement our GAAP financial results. These financial measures should not be considered in isolation or as superior to our GAAP financial measures. Additional information concerning our non-gaap financial measures and a reconciliation to GAAP is available on our website at www.iff.com, on the Investor Relations page. 2
Industry Overview vflavor and Fragrance industry is ~$12 billion vgrowth driven by consumer products market vflavors and fragrances drive consumer preference and brand differentiation vnon-cyclical demand, driven by growth in GDP and disposable income Mature markets on par with GDP Significant opportunities in emerging markets 3
Competitive Landscape vmajor global flavor and fragrance houses account for ~ 65% of market Remaining market highly fragmented with many regional suppliers serving smaller, local customers vglobal flavor and fragrance houses gaining share with large multinational consumer products and food companies 4
IFF Profile v A market leader in creating flavors and fragrances through two focused business units v More than 70% of sales generated outside U.S. v Sales, creative and manufacturing in 30 countries v Strong relationships with market-leading brands v Creations used in a wide variety of consumer products 5
Product Categories Fragrances: Fine & Beauty Functional Personal Wash Fabric Care Home Care Flavors: Savory Beverages Sweet Dairy 6
Diversified Global Portfolio Sales by Region Sales by Category Europe 36% N America 29% Greater Asia 21% Latin America 14% Fine Fragrance & Beauty Care 20% Functional fragrances 25% Flavors 43% Fragrance Ingredients 12% 2006 Sales $2.1 Billion 7
Significant Opportunity to Grow IFF Market Share vbroad global presence and local market expertise Deep understanding of market dynamics and consumer needs vstrong and long-standing relationships with the leading global and regional consumer product companies vunique customer-value proposition Proprietary consumer insight and brand understanding Best-in-class creativity, innovation and technology 8
R&D A Key Differentiator v Current spend ~ 9% of sales v Categories of focus: Traditional R&D for flavor & fragrance molecules and taste systems Taste receptor cell research Naturals and nature-inspired technology Creative teams v Output: Patented materials Proprietary molecules Unique delivery systems Consumer preferred flavors and fragrances 9
Sales Growth (Dollars in millions) 2002-2006 (Annual) CAGR 4% 2006 & 2007 (Quarterly) +11% vs 06 +8% vs 06 $1,809 $1,902 $2,034 $1,993 $2,095 $566 $574 $511 $531 2002 2003 2004 2005 2006 Q106 Q107 Q206 Q207 10
Operating Profit Percentage (Adjusted to exclude restructuring charges) 2002-2006 (Annual) 2006 & 2007 (Quarterly) +80 bps vs 06 +80 bps vs 06 17.2% 17.3% 16.8% 14.6% 15.8% 16.0% 16.8% 17.1% 17.9% 2002 2003 2004 2005 2006 Q106 Q107 Q206 Q207 11
Earnings Per Share (Excludes one-time tax items, restructuring, & asset gains) 2002-2006 (Annual) 2006 & 2007 (Quarterly) +17% vs 06 +13% vs 06 $1.92 $2.12 $2.23 $1.94 $2.32 $0.59 $0.69 $0.67 $0.76 2002 2003 2004 2005 2006 Q106 Q107 Q206 Q207 12
Disciplined Deployment of Cash $400,000 $1.00 $320,000 Operating Cash Flow Dividend Per Share $0.90 Priorities $240,000 $0.80 $0.70 Reinvest in business Dividend: 30%-35% payout $160,000 Share repurchase/asr $80,000 $0.60 $0.50 Capability-building acquisitions $0 $0.40 2002 2003 2004 2005 2006 13
Return Cash to Shareholders v Dividends 30% - 35% dividend payout 10 percent increase with October 2007 payment Second increase since October 2006 v Share repurchase activities Use free cash flow for share repurchase New $750 million share repurchase program Approximately 15 percent of shares outstanding Substantial portion is expected to be an ASR 14
Business Priorities vexecute business plan Focus on customer needs Continue to improve operational efficiency vbuild a stronger IFF People development Improve business model Leverage innovation and creativity vcontinue to create shareholder value 15
Financial Goals 2007 2009 v Grow local currency sales by 4 + % per year v Improve operating margins to 18 + % of sales by the end of 2009 v Increase EPS 10 + % per year, on average v Grow dividend in-line with EPS growth v Execute stock repurchase plan v Pursue capability-building acquisitions 16
Investment Rationale vmarket leader in dynamic and growing industry vserves large and growing consumer nondurables market vunique customer-value proposition vstrong competitive position in both mature and emerging markets vnon-cyclical demand, driven by growth in GDP and disposable income vcompelling financial story 17
International Flavors & Fragrances Inc. Lehman Brothers Back-to-School Conference September 5, 2007 Douglas Wetmore, SVP and CFO